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Stop the Presses, Seriously!

April 2007, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Approximately 26,500 attendees of the National Automobile Dealers Association (NADA)’s annual convention saw the latest and greatest, but it seemed as though the big news came out in the weeks following.

Sure, there was the data-security debate that had Reynolds and Reynolds facing off with the rest of the industry (check out the NADA coverage story on page 12). There was also the semi-resurrection of Centrix Financial, now called Universal Special Auto Finance — a new, leaner company looking to take on the nonprime lending segment. Universal Underwriters was also at the show touting its global reach under its new brand name — Zurich.

Then there was the Chrysler Group’s press briefing on the first day of the show. Tom LaSorda, the automaker’s chief executive, admitted the company built too many cars, and promised that he and his management team would turn things around.

Paul Taylor also weighed in with his annual forecast, reporting that 2007 new-vehicle sales should equal the 16.5 million vehicles sold this year. He also noted that new-car dealers will be paying extra special attention to the used-car market, a prediction that fueled the need for dealers to visit exhibitors showcasing new inventory management solutions. And there were plenty.

It appeared as though I was staring at another typical show coverage issue. Well, that’s how it started out. And before I could put my fingers to the keyboard, I got word that Automotive Professional Inc. (API) was folding, joining names like WPC Associates Inc., which closed its doors last August, and Warranty Services Co., which reportedly disconnected its phone lines in November (check out the Developments section on page 8).

And just as I was about to chase down that story, I got word that DaimlerChrysler was talking to General Motors about purchasing its Chrysler Group. Shortly thereafter, Bloomberg News reported that Peter Zetsche, DaimlerChrysler’s chief executive, talked about the possible sale of the automaker’s auto loan and leasing unit. The last bit of news on the topic had two equity firms as the frontrunners to buy Chrysler Group, with no word on the fate of the company’s financing arm.

Then there was Ford Motor Company, which announced in March that it was unloading its Automotive Protection Corp. (APCO) to a private equity fund managed by Stone Point Capital LLC. Word on the street is the company’s management team, which purchased a substantial amount of the company’s equity, will remain in place.

Then came the morning in March when I learned from a CBS News report that my wife’s Honda Accord, which she purchased in February 2003, might not have racked up all the miles her odometer says she has.

Apparently, Honda Motor Company admitted that six million Honda and Acura cars might be racking up the mileage too quickly and costing car owners money. The report said Honda settled after a class-action lawsuit was filed in Texas in April 2004, which charged that odometers (outfitting vehicles sold between April 13, 2002, and Nov. 7, 2006) that run too quickly can make warranties expire too soon and create excess mileage fees for leasing customers.

According to the letter my wife received from Honda, a Federal court in Texas will decide on May 30 whether to approve the automaker’s proposed settlement. I TOLD MY WIFE NOT TO BUY A FIRST GENERATION VEHICLE.

Nissan is also under the microscope after an attorney found similar problems with 10 Altima odometers, and filed a class-action lawsuit. Nissan declined to comment in the CBS News report, and has denied the problem in court documents.

The first three months of the year have certainly been something else. The Big Three automakers entered the NADA event coming off a rough January, and February saw them lose more market share to international nameplates.

I don’t want to sound too bleak here, so I’ll end this editorial with an inspirational statement William Bradshaw, outgoing NADA Chairman, read during the show’s official opening:

“The auto industry today is confronted with a tremendous selling problem. From a factory viewpoint … product facilities exceed demand. Car buyers want more features for less money. And competition is super intense.

“From a dealer’s perspective … expenses … especially fixed … are out of proportion to sales. There’s intense competition in every price class. And the public is better informed and more demanding than ever.”

Bradshaw continued: “The situation sounds familiar, doesn’t it? How can we overcome such problems? And yet, we already have. This statement was written in 1933 — 74 years ago. The challenges we face today can be overcome, just as we overcame those of 1933 and every year since.”

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